In yesterday’s post “You’re Being Scammed” we discussed how the average investor is part of one of the largest scams ever perpetuated against the American public. Today I would like to continue our discussion about how this middle class delusion of equating “risk” with “reward” could potentially destroy your chance of ever getting rich.
In his recent book, “Panic: The Betrayal of Capitalism by Wall Street and Washington,” author Andrew Redleaf makes the following quote:
“The notion that risk equates with reward is worse than a myth—it’s a mass delusion, a mass delusion that in our time has cost investors trillions of dollars that we can measure and the U.S. and global economy probably trillions more that we will never be able to sum.
It has lulled an entire generation of financial advisors into complacency about the risks to which they expose their clients… In the real economy, risk is manifestly not the source of wealth but the great destroyer.” (emphasis mine)
In essence what he is saying that while wealthy Americans understand that risk will actually destroy your wealth, average middle class investors believe that in order to make big returns you need to take on big risks.
Don’t believe the hype! Think and invest like the super rich.
Warren Buffet, the greatest investor of our generation and possibly the greatest of all time, has two rules of investing:
- Don’t lose money
- Don’t forget rule 1
Focus on low-risk opportunities with the potential for above average gains and take a giant step towards financial independence.